Evidence of meeting #34 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was fatca.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Ian Russell  President and Chief Executive Officer, Investment Industry Association of Canada
Allison Christians  Professor, H. Heward Stikeman Chair in Tax Law, McGill University, As an Individual
Marc-André Pigeon  Director, Financial Sector Policy, Credit Union Central of Canada
Roy Berg  Director, US Tax Law, Moodys Gartner Tax Law LLP
Arthur Cockfield  Professor, Faculty of Law, Queen's University, As an Individual
Ralf Hensel  General Counsel, Corporate Secretary and Director of Policy, Investment Funds Institute of Canada
Katie Walmsley  President, Portfolio Management Association of Canada
Lynne Swanson  As an Individual
Max Reed  Attorney, White and Case LLP, As an Individual

5:05 p.m.

Attorney, White and Case LLP, As an Individual

Max Reed

My answer is that it could be done by the IRS, and it is not a piece of legislation that would be required.

5:05 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

Okay, thank you.

5:05 p.m.

Attorney, White and Case LLP, As an Individual

Max Reed

An amendment to the treaty would be—

5:05 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

Okay. Thank you, sir.

Mr. Cockfield, you mentioned that under Canadian law, or under PIPEDA, you feel there would be a charter violation for access to information, but doesn't the CRA do the same thing when they ask Canadian citizens to give up information that they need as well?

5:05 p.m.

Professor, Faculty of Law, Queen's University, As an Individual

Prof. Arthur Cockfield

I'm not sure what—

5:05 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

You talked about the U.S. asking for information from U.S. citizens and you wondered about PIPEDA. I guess my question is, if the U.S. government is able to do that, doesn't the CRA also do that, in essence, with Canadians? Does it not ask for the same kind of information?

5:10 p.m.

Professor, Faculty of Law, Queen's University, As an Individual

Prof. Arthur Cockfield

Certain information is collected by the CRA. Under domestic law, the banks have to send information, say on interest income, and they use that to calculate a Canadian taxpayer's tax liability, but the IGA changes that regime, as I mentioned in my opening remarks. Now, a foreign government will access—as Ms. Swanson also addressed—the total quantum of an account, as well as account withdrawals and deposits. Nowhere in Canadian law do we have that information shared with our government, so this is a big change.

5:10 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

Thank you.

I want to go back to you, Mr. Reed. I don't know if you're familiar with what OECD is doing currently, a global study on tax evasion. We've done a lengthy study on tax evasion and profit shifting from large multinational corporations. We're going to have some cooperation, we're going to have some treaties that will lead to that work when it finally starts to formulate.

Can you explain the work that's being done by the OECD currently, and how it compares to FATCA, and provide examples of any precedence for signing tax information-sharing agreements in Canada?

Are you familiar with that work being done?

5:10 p.m.

Attorney, White and Case LLP, As an Individual

Max Reed

I am somewhat familiar with the work that the OECD is doing, and my understanding is that they are sort of using FATCA as a model for a series of what I understand to be bilateral agreements between different tax information-sharing agreements. So I am sort of familiar with that.

I would simply say that it's my personal view that FATCA as an information-reporting mechanism has its issues, as other people have discussed, but that's largely not my concern. My concern is what that does for the million U.S. citizens in Canada, because they're by-products of that. FATCA's not designed to get at them. They're sort of collateral damage, if you will. So I'm trying to figure out a way that we can make their compliance burden easier, because FATCA is probably not going away.

5:10 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

Okay, thank you.

Chair, how much time do I have.

5:10 p.m.

Conservative

The Chair Conservative James Rajotte

You have about 30 seconds.

5:10 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

Maybe I'll quickly ask Mr. Cockfield this question.

If we don't enter into these types of agreements—and I think this is actually setting a precedent—don't we risk becoming a Cayman Islands, in essence? I know that's a long stretch, but will we position ourselves as such if we—

5:10 p.m.

Conservative

The Chair Conservative James Rajotte

That's a big question.

Mr. Cockfield, could you briefly address that?

5:10 p.m.

Professor, Faculty of Law, Queen's University, As an Individual

Prof. Arthur Cockfield

They're treating us as they're treating the Cayman Islands. I don't think we'll become the Cayman Islands.

One of the interesting features of the U.S. reform is there's absolutely zero evidence that the Canadian financial system is being used to assist Americans with offshore tax evasion. We're not the Cayman Islands. I can't see that ever happening in our country.

But one of the problems with this U.S. exceptionalist move is they're treating us as if we are the Cayman Islands, instead of their largest trading partner, with family members in the hundreds of thousands living in our country.

5:10 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you.

Thank you, Mr. Van Kesteren.

Mr. Brison, please, for your round.

5:10 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

Thank you.

To follow on Mr. Van Kesteren's questions, Mr. Cockfield, we are a NAFTA partner with the U.S. Our banking system is recognized to have some of the strongest governance in the world over our system of banking and our financial services sector. We are not a tax haven. We have a sound system of taxation that is open and transparent.

I agree with what you said earlier. We ought to have been able to leverage on these facts and our historic relationship with the U.S. to negotiate some exceptions. We were not targeted by FATCA, but we were caught in the FATCA web. For instance, when the Americans did Buy American...we were able to negotiate some exemptions.

The contributions made by the Canadian government to registered accounts, RDSPs and RESPs, are Canadian taxpayer-funded contributions to help Canadian families. The earnings on these contributions will be considered taxable earnings by the IRS. Would that have been one of the areas where we ought to have sought and attained an exemption from the U.S.?

5:15 p.m.

Professor, Faculty of Law, Queen's University, As an Individual

Prof. Arthur Cockfield

Yes, I would agree with that. I have heard from some government officials that we were offered a concession in that these wouldn't be reportable accounts, retirement accounts. But, in fact, in the U.S. model 1 IGA, they're offering that exemption of retirement accounts to every single country that signs an IGA. So it's no special exemption for Canadians.

You're exactly right to worry that even though they're exempt, non-reportable, they're still subject to U.S. taxation. This has created a great deal of fear among many Canadian taxpayers.

5:15 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

Thank you very much.

Mr. Reed, do you believe Canada-U.S. dual citizens are being made sufficiently aware of the consequences of the IGA for both of them? Are the Canadian and the U.S. governments doing enough to reach out to citizens to inform them of their reporting obligations?

5:15 p.m.

Attorney, White and Case LLP, As an Individual

Max Reed

I think the answer to the first question is no. I think that most people learn of their U.S. tax obligations from the newspaper. The United States has a very extensive consulate network in Canada, both a well-staffed embassy and a well-staffed consulate network outside of Ottawa. And I think one of the solutions to this could be that either the CRA or that U.S. consulate network could be encouraged to offer information seminars and do outreach so that people are aware of what their reporting obligations are and how to meet them.

5:15 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

Ms. Swanson, when you became a Canadian citizen, did the U.S. consulate make it clear to you that you were still considered a U.S. person for tax purposes?

5:15 p.m.

As an Individual

Lynne Swanson

No. In fact, the U.S. consulate did exactly the opposite.

My experience was the same as that of the grandma in Vancouver whom I mentioned. I called the U.S. consulate in 1973—so that was 41 years ago—and they told me clearly, firmly, and directly that I was permanently and irrevocably relinquishing U.S. citizenship.

I had no idea the Americans still considered me to be a U.S. citizen or a U.S. person until 2011, when a friend sent me an article that had appeared in the Financial Post, indicating that without my knowledge and consent, the U.S. Supreme Court had reinstated my citizenship in 1986.

5:15 p.m.

Conservative

The Chair Conservative James Rajotte

You have 30 seconds.

5:15 p.m.

As an Individual

Lynne Swanson

If I could just say, as well, my Canadian citizenship certificate states that Lynne Swanson “is a Canadian citizen and, as such, is entitled to all the rights and privileges and bears all the responsibilities, obligations and duties of a Canadian subject.”

For four decades I have met my responsibilities and obligations to Canada. I now expect Canada to meet my requirements, to uphold my rights in Canada and those of all other Canadians.

5:15 p.m.

Conservative

The Chair Conservative James Rajotte

Okay, thank you.

Thank you, Mr. Brison.

Colleagues, as you know, we have the bells ringing. We do have a bus to pick up members at about 5:35, so I'm recommending that we do perhaps three more rounds.

Is that okay with members?

And then we'll go to vote immediately after that.

Thank you.

I'm going to take the next round, as the chair, okay?

5:15 p.m.

An hon. member

That's how it is!